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tv   [untitled]    June 11, 2012 7:30pm-8:00pm EDT

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it's true but you know what to them it's true they should have the right to say that. right thing so much for watching that's going to do it for now well be right back here in a half hour i'm christine. good afternoon and welcome to capital account i'm lauren lyster here in washington d.c. these are your headlines for monday june eleventh two thousand and twelve a one hundred billion euro bailout for spain's banks that adds to the tab of the
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already and dead spanish government is what reportedly was agreed upon over the weekend so is this a blood wedding between banks and this date that will end in a bloodbath of pain threatening to consume all of europe well that's what i guess the honest very fokus as is the case most speak to the greek economists and what does this seemingly better bailout mean for the terms of ireland greece and portugal as bailout that those countries have submitted to and when it comes to revolting against the harsh terms imposed by the euro crowds could upcoming greek elections be the best platforms we'll discuss also the nobel prize is about to become a little less of a prize the nobel foundation reportedly has to cut back after a decade of overspending on i guess a nineteen global know it all doesn't come cheap we'll tell you what we think in today's loose change let's get to today's capital account.
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so when we talk about bailouts or bank recapitalization or rescue plans what usually capture the headlines are dollar amounts the names of various abbreviated technical vehicles for bailouts be them the f.s.f. or the e.s.m. there's usually mention of a country's top politicians a technocratic commission or international organization thrown in here or there usually merkel somewhere in there but when you get to the actual data gritty of what's behind titles like a stability facility or a so-called solidarity fund are you really looking at something more like this
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solutions that channel the workhouses of the victorian era of the dickens novel in their conditions this is all over twist as they were depicted the workhouse which was where the poor had to go for help with food and a bed and they worked for it but life was intended to be so harsh that only the truly profoundly down and out would apply the work was so bad that it would deter anyone who could avoid it from coming and it would punish those who sought help this was work like breaking stones or breaking bones will surely seems a fitting comparison for bailout programs that impose more loans on countries and harsh austerity on the public begging for scraps only to be met with what optimus might call tough love take a look. yeah
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don't ask for more when the terms are this bad this is the comparison that young is very focused makes between the workhouses of a dickens novel and these so-called bailout funds he's here to tell us how it works and also how spain is going to fare entering this so-called workhouse also what this means for greece ireland and portugal and their rock crushing plights he's a professor of economics at the university of athens and author of the global minute america the true origins of the financial crisis and the future of the world economy and we are so happy to have him on this show on a day when there is so much news going on in europe in spain and that has major implications for greece so first of all thanks so much for being on the show professor good as usual money it really is all mine so let's start with this spanish bank bailout because that's what's all over the news and i know you've been writing about it this is
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a bailout for the banks but the funds are funneled through the sovereign so this increases the debt for spain possibly by as much as twenty percent according to one number i saw in the financial times so my question what does this do to the spanish government's solvency going forward this bank bailout. it simply ensures that the spanish state is insult and this is ireland all over again let's not forget that using the island is in the workhouse of the year of assent is not because the state overspent but because its banks went bust and their losses were transferred onto the shoulders of the irish taxpayers and given that ireland could not bring its own money it had to borrow and borrow and borrow or on behalf of banks at some point the solvency of the irish state simply fell through and island had to resort to the workhouse of the of herself this is precisely what's happening now in spain the difference is that the death of the of the spanish state approach
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exceeds a trillion euros so i'm like what islands that would could be put in the workhouse and forgotten there spain is the thought of the backside of the uterus on it effectively is going to be lead to the disintegration of the eurozone if matters had allowed to proceed the way that they're proceeding why that's a pretty bleak prediction i know one time you said that that spain was too big to bail out do you still agree with that. just look at the numbers small them in three years how much money does the episode have to play with that's most two hundred billion yeah the fact that they see if they like waving around the corner and the guardian inspired these are how you into twenty and i say you have you have your answer so you don't think that there is a way to to salvage spain i want to get a little bit more into the details of this spanish bailout although i know that we don't know yet where the money is coming from exactly but if you look at the
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bailout funds one of them is the e.s.m. and one of the concerns about this fund the european stability mechanism is that it's considered a senior creditor by european authorities meaning that it has to be paid back first if spain defaults on its debt meaning that investors who buy spanish bonds now risk being behind the e.s.m. the spain can't repay what is this due to spain's ability to borrow. it diminishes it it increases the yields on the spanish bonds increase the cost. which the spanish government will have to borrow already that course is where to put it so it's complete get them in spain is out of the markets effective now and europe has no plan as to how to refinance spain's private sector debt and public sector that now there's another dimension that this perhaps the most significant which we didn't get and that is that spain is in the recession so by posing. the fears
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so stated now which is what is happening already the spanish state is going to load more than ten billion of its budgets very shortly the followed by another ten billion that is going to accelerate the recession that is such and we accelerate the capacity of the spanish states to. the duty sufficient taxes you don't find is that itself this is just that it's that deflation of the cycle which is. creating out of control and one thing that i want you to elaborate with that is that on paper people have said that spain's bailout it's not subject to some of the tough conditions that ireland or greece or portugal had to submit with their bailout but you brought up an interesting point which is the austerity that they have already had to submit to it so is this really so much better than the other bailouts or is
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it more of the same. on paper it is better on paper as spain is going to get up to one hundred billion dollars its banks without any new study measures but in reality that is not so because that cannot forget that this is not the first bailout for spain the seat of the last few months the first official bailout there was another one the arrow which was effectively mr dragging out there you see been found put printing hundreds of billions on behalf of spain providing it as you quiddity to the spanish banks so the spanish banks that borrowed from the e.c.b. at one percent could then lend at much higher than that is they do the spanish state it was a way of ensuring that spain were to remain liquid the spanish government of course but for the mr draghi to if fact that liquidity the vision of the spanish banks and therefore in directing financing financing madrid. he exacted from both the rome
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end of the matter very see the measures that were put in place over the last two months so the austerity measures have already been place what has happened now is that instead of simply financing this banished state through. in that it gives its banks now that this death to drive this race between him and solvents they've been it's all in banks it's clear for all to see. billions are also providing loans in spanish they directly in order to recover dollars that banks the same banks that were being used up until very recently in order to finance really and the arrow of them this from the state now if that sounds complicated it is because it is an extremely emain complication which we have in europe instead of a national plan for getting out of the whole lot to be clear what you're saying which sounds absolutely insane to even average person is that you have the banks propping up the state and also the state propping up the banks is that right. well
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think about it very simply you have two really bad swimmers extremely weak in stormy waters leading on to each other sinking very fast worlds the bottom of the sea this is what we have while your analogy was much better than mine i think that definitely sums it up and paints a vivid picture speaking of bleakness i want to get a little bit more into your work house comparison to really give our viewers an understanding of this so-called stability fund the f.s.f. which is another one of these bailout funds that is likely to fund the spanish bailout you compare it on on one hand to a c.d.o. which is a collateralized debt obligation which anyone who knows about the two thousand and eight the national crisis knows and that conjures up how much have they could those can cause but also you make the comparison to the victorian workhouse for those maybe more historically oriented like we saw in oliver twist i played a clip so how did these comparisons play out to listen ok let's take these two go
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one of the time firstly there were cars composing when greece for the through the cracks in may two thousand and ten. the unit being the union in its wisdom decided to create a bailout fund the of the set the purpose of which was to convince the markets that we're going to be standing behind these we can members and therefore hoping that it will never be used but as an additional safeguards germany in particular insisted that the f.s.f. would become another guys in full for all countries like especially the in spain but might think of using it as an alternative to financing themselves in the markets so they want to get it there but they want it at the same time to make it very unattractive so that the large countries like italy and spain will not to use it which is a little bit of a contradiction. turning out of the to the to the structure of the effort. and my analogy of the studio think about what was this as the euro was finance a lot. of debt instrument it was
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a paper title which it was let me look like it like a box which contained. small pieces of other people states including governments companies some prime market mortgages and so on each one of them with its own interest rate and its own default rate all that was packaged together it was so can we get there nobody knew what was inside and were selling like hotcakes until of course that the bottom fell out of the market now the epicenter of both in the international money markets you don't provide this bailout funds by issuing its own bonds those bonds are like studios because they comprise a little piece of that one by germany one by france one by one by the noble and so on each one of them with different default rates each one of them we didn't need it but it's an interesting one of the company that this is security guys and bulk of that you know a small chunk of those percent bombs exploding right so in other words pain is appealing to the four loons yet is becoming sort of it moves on one side of the
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equation to the other so it can no longer go to those chunks of the episode bones that are used in order to provide bailout funds to greece portugal and out in spain and it's becoming a boat from the epicenter and that has that even vicious dynamic of a domino effect within the epicenter bonds just like lehman brothers studios that. interesting comparison this many years after lehman collapsed we'll have to see if the rest of europe is going to suffer the same fate because when we get back after the break i want to talk to you about what this spanish bailout means what these sinking swimmer's mean for ireland for greece for portugal so we will have much more with yanis varoufakis professor and author after the break also still ahead a mortgage firm has a solution for states hardest hit by the housing crisis in the u.s. and then up until main yaf we'll have the details and latest changes but first your
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closing market numbers. culture is that so much i'm afraid we're going to make a lot of the play area because the era of the greenback finally coming to an end with china and japan now trading with each other in their own currencies is the international monetary. mission and free credit take should free transport charges free. range means free risk free. free. download free blogs can plug in videos for your media
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projects and free media and on the hard teton tom you.
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so before the break our guest was talking about l.t.r. owes the e.c. be three year one per cent loans meant to shore up banks and i just want to point out something to our viewers that's important to remember because while the e.c.b. and governments try to redirect money to insolvent banks in certain countries it's important to remember that the money is moving with in the eurozone banking system too which affects the dynamics of what this chart essentially shows is capital moving out of the banking system in italy and spain and at the same time deposits are going into two surplus companies in this case germany and the netherlands so this all compounds the problem so it's just another element of this to consider as we talk about the broader implications of just this latest news for the broader euro zone yanis varoufakis professor of economics at the university of athens and author of the book you see here the global minute tar america the true origins of
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the financial crisis and the future of the world economy is here telling us everything we need to know about just how bleak this is so we talked about spain before the break i want to ask you you said on paper yes spain looks like it's a better situation better conditions for this bailout but in reality it's not that different than what we've seen with other countries so the question becomes should ireland greece portugal should those countries try to negotiate the terms of their bailouts or are they is spain submitting to the same thing they did when he did shoot. our good beef over every european should be it's the kind of suits in the name of europe because every utopian. new women's. everyone from the been in all the way up to finland and from ireland all the way down south east towards greece is going to suffer there may be some beneficiaries
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at the moment let's not forget that germany's borrowing costs are almost zero these days and also there is a cut of the flight as you said into germany from which german banks are benefiting but the it takes a completely foolish disposition to think that these benefits are sustainable for a country like germany once spain becomes a lost cause like greece ireland for example it would be absolutely impossible to maintain the euro zone and when that happens the breakup of the euro will mean that country like germany lose its export markets in particular china if it has to reconstitute stage market invited and then suddenly all the monies that are being owed to the central bank of germany by you all that that is something banks and that is what what diagram of yours showing this is never going to be declared to the biggest bank we're talking about a complete at the implosion of the whole continent and as far as this sounds
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horrible as far as revolting against that implosion against the e.u. against troika bailout terms you've written about the iris referendum this was a chance for irish voters to reject the e.u. fiscal treaty and they didn't you use your view was that they were blackmailed because they were told if they voted no the money from the troika would cease they would be cut off so now we're looking to greek elections there on june seventeenth in your view is this the chance to send the right message to brussels and what to that message look like as far as the election results in your view. well indeed the irish people where black means they were told that forget about the fiscal pact the fiscal pact that we are voting for or against. it's nonsense that we all know about that but if we say you know then ireland is cutting itself off is some funding in the future and it's not a hard job in dublin in cork to fix european policy let the germans the french do
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it we should simply play the role of model prisoners and continue to be funded so that you know islanders not fall through the cracks like it gets that now this same strategy is being pursued as we speak in greece the good people who are going to the polls on sunday have been told that unless you vote for barclays that will. adopt the model prisoner strategy and in particular the conservative part of the new democracy and this was in spite of the apostle and if you vote in a party which is recommending. that existence to do the policies that are being pursued at the moment then effectively greece is going to be thrown out of the euro all sorts of things will happen you this is precisely the outage scenario what would it take for this scenario to break down take the greek people on sunday voting for a party like syriza the radical left part of it or at least not vote for the
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bailout terms and conditions parties which are affected really asking of greece to do something that it is not possible to do and that is stick to the terms of condition of its bailout which neither we nor god and his angels give him and they were to send them on athens and form a government could possibly stick stick to it because the only just a manageable and just a follow up we just haven't met but i do want to ask you this because you are great this is your country my question to you know after the election face to result does get the most votes what is it about this party that gives you hope that it would not end up selling out greece like some other politicians are your plan. welcome to outstanding politicians have to do that but the only reason why i'm. giving them my vote of confidence we've come to this conference is because they're saying the right thing they're saying that the only way greece can stay in the euro and the
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kids should stick to you because you will be able to get out. so it's not the time . and conditions of being placed on it but spain. portugal among them and it's the only party you know that says that so they will have my vote even though. i will manage to vote for them by going to the rest of the. electorate i mean first i know you haven't been too enthusiastic about that vague manifesto but i every day of being on the show and laying this all out for us thanks so much that was the honest fair fox professor and author. let's wrap up with loose change let's come back to the united states we've been
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over on the other side of the atlantic not that you can really separate them because what happens there affects us here but let's talk about the u.s. situation let's talk about the mortgage crisis first let's back up because when you usually hear about eminent domain stories the narrative usually involves a battle usually goes a little something like this the town argues they're offering more than is required by law to those who choose to relocate the township is right in there with thirty five thousand dollars over the value but the problem is at this point the value of these half demolished homes is close to zero. who eminent domain in a world where we witnessed a housing crisis will listen to this now a mortgage firm wants local politicians in california to use eminent domain to solve the housing crisis reuters reports that the move would keep cash strapped residents in their home by condemning their mortgages instead of their houses and
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the mortgage for and would use private money to fund the public condemnations of underwater mortgages it sounds like mumbo jumbo the bigger picture that i take away from with this is how crazy this is gotten and then it domain is used as a gauge to indicate how much a country values its citizens freedoms and the fact that it's being used in this way that seems like such overstepping such a derivative of eminent domain to me seems really alarming i mean i agree with it's not supposed to be used for this certainly but i think it's what i think is crazy about this is that it isn't even that this is being used to correct the problem that started with the market this is to correct the problem that was created by the government trying to correct the problem so it's all these problems that are perpetually one over the other if they had i mean this goes all back to the fact that. you can go as far back to the credit boom but the point is banks have assets on their books that are they need to be marked down you need the falls to happen you need bankruptcies all these things and nothing's be allowed to happen other
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reach into the pocket for i'm going to don't mean to try and solve this problem i just find a reason it's really absurd and where do you draw the line even if it was well intentioned i mean i just don't think you can i mean i don't my own is supposed to be there to create economies of scale you need for some reason if the larger society benefits by have by running a highway through some you know some farmland confiscate the farm then you give it over a prize but this is just crazy but i agree so we agree so let's move on back in two thousand and nine some argued it was too soon for president obama to win the nobel prize because we know hope and change is worked out but it seems he may have won the prize and it's money just in time. when president obama won his nobel peace prize last october he promised to donate the one point four million dollars in prize money to charity today the white house released a list of those charities ten of them and all. of those charities windfall that no others will get from the nobel prize because the nobel foundation now says the
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money that it awards will fall to one point one two million dollars they have to cut back i think by a fifth because of years of overspending so i guess it's a little expensive to anoint the elite chosen few who get to just kind of really persuade the conventional wisdom just by saying something because they have a nobel prize by the by by the fall don't listen anyone with a nobel prize i don't want to hear it because it's annoying to know it alls so i don't want to know anything about you know should we auction off these titles because there are people out there be willing to buy you know his nobel. much better you know ray some guys think that's a good yeah i can what do you think like more in buffett's lines you could it could be the nobel prize has won buffet lunch money for three point five million we found out now the money goes to charity anyway because that lunch money goes to charity are you going to hear of warren buffett young i like that idea he's going to be our hero actions off his dinner buffet i'd rather i mean if i'm going to pay that much money i do have
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a nobel prize who could be like nobel laureate dmitri you can see this yeah all right i like the sound of that yeah i mean are you sure what do you think of a. nobel prize laureate dmitri kind of you know sort of the sending snarky i asked a joke you know what you're save by the clock because we're at a time when. about political capital anyway then i think we're on to something let us know what you think and that's what we have time for thanks so much for watching our show be sure to come back tomorrow and see another one and in the meantime you can also follow me on twitter at lauren lyster you can give us feedback on the show or catch any you missed and also subscribe to do that a youtube die. capital account and you can see there's an h.d. on hulu and you go alone dot com. have a great night. there
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hasn't been anything yet on t.v. . it is to get the maximum political impact possible. before the source material is what helps keep journalism on the real world. we want to present. something old. he used to. be an easy.

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